A New Measure of the Canadian Effective Exchange Rate /

Selecting the currencies to include in the new index In order to broaden the country coverage in the new index, we lowered the inclusion threshold so that countries with at least 0.5 per cent of Canadian imports or exports of non-energy goods trade, on average, over the past 10 years are now captured in the index. [...] Under this new criterion, 16 countries (Australia, Brazil, China, Hong Kong, Japan, South Korea, Malaysia, Mexico, Norway, Peru, India, Sweden, Switzerland, Thailand, the United Kingdom and the United States) plus the euro area are included in the new index, compared with the five countries (China, Japan, Mexico, the United Kingdom and the United States) plus the euro area in the CERI. [...] The calculation of the weights for the CEER follows a methodology similar to that used by the Federal Reserve and presented in Leahy (1998) and Loretan (2005). [...] The weights in the major currencies index are similar to those in the CERI, while the OITP index puts significant weight on countries like China and Mexico, primarily because of the competition Canada faces from them in third markets. [...] Compared with previous periods, the Canadian dollar depreciated less than the Chinese renminbi (considering the depreciation of the Canadian dollar against the U. S. dollar), due to the decision by Chinese authorities to allow the renminbi to depreciate relative to the U. S. dollar.